Interest rate fears put brakes on sales

http://www.theguardian.com/business/2014/jul/14/interest-rate-fears-consumer-spending

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Shoppers put the brakes on spending last month amid concerns over the potential for higher interest rates, a retail industry report suggests.

The latest retail sales index from the British Retail Consortium and KPMG showed that like-for-like sales fell 0.8% compared with a year ago, with total sales – including shops open for less than a year – up 0.6%.

The report showed that consumers continued to benefit from competitive pricing in supermarkets as underlying sales in food were 2% lower in the three months to June, compared with a year earlier.

Home accessories was one of the weakest performing sectors in the month, prompting KPMG's head of retail, David McCorquodale, to speculate that uncertainty over the timing of the first hike in interest rates since 2007 was having a dampening effect on sales. The survey covered the month in which the Bank of England's governor, Mark Carney, warned that rates could rise sooner than markets were expecting.

McCorquodale said: "Even sales of home accessories and furniture flat-lined, which is surprising given the UK is reportedly in the midst of a housing boom."

Clothing retailers fared better, with recent warm weather driving demand for summer clothes and shoes and meaning that most retailers were not forced to resort to the deep discounting seen in previous years.

The World Cup provided a mild boost to food and drink sales but England's short-lived stay in the tournament meant the sector's sales figures continued to be dominated by falling food inflation.

The BRC's director general, Helen Dickinson, said consumers looked set to continue to benefit from bargains in their food shopping. "The recovery is still on track, however we are detecting differences in attitudes from customers, perhaps led by the competitive environment for food prices.

"Consumers are delighted to be saving on their food bills, but are prepared to spend a little bit more on discretionary items."